FUTURE JET AIRWAYS Notes to Accounts

Security and Salient Terms :


a. 6,989 Non-Convertible Debentures (NCD) were issued in September 2015 at a face value of Rs.1,000,000 per debenture. These debentures are redeemable at the end of five years from the date of allotment at a premium of Rs.70,100 per debenture. These NCDs are unsecured and carry an interest rate of 20.64 % p.a. payable quarterly.


b. Rupee Term Loans of Rs.149,417 lakhs (Previous Year Rs.4,717 lakhs) and Foreign Currency Term Loan of Rs.10,324 lakhs (Previous Year Rs.15,875 lakhs) are secured by way of a first pari-passu charge on domestic credit card realization, both present and future.


These loans are repayable in monthly instalments by March 2022. Interest rates are linked to respective Banks MCLR / LIBOR plus Margin.


c. Foreign Currency Term Loans of Rs.82,176 lakhs (Previous Year Rs.46,862 lakhs) are secured by way of a pari-passu charge on all the current and future international credit card realizations, received into a Trust and Retention Account maintained with the Banks together with a First hypothecation charge on the four flight simulators and an exclusive charge on Fixed Deposits aggregating to Rs.10,435 lakhs (Previous Year Rs.10,435 lakhs) with maturity value of Rs.11,414 lakhs.


These loans are repayable in monthly instalments by September, 2021. Interest rates are linked to LIBOR plus Margin.


d. Foreign Currency Term Loan of Rs.181,364 lakhs (Previous Year Rs.89,196 lakhs) is secured by way of First Charge on: (i) IATA BSP receivables from the Kingdom of Saudi Arabia, United Arab Emirates, Qatar, Oman, Bahrain and Kuwait (ii) Revenue Account, Debt Service Reserve Account and Receivable Collection Account, maintained with the lead Bank.


These loans are repayable in monthly instalments by August, 2021. Interest rates are linked to LIBOR plus Margin.


e. Foreign Currency Term Loan of Rs.90,790 lakhs (Previous Year Rs.92,757 lakhs) is availed against a corporate guarantee given by one of the Shareholder to the lender. In return, the Company has hypothecated one of its B737 Aircraft in favour of that Shareholder; however, creation of pledge on 54,772 shares held in Jet Privilege Private Limited is pending.


The loan is repayable by way of a bullet payment in March, 2019. Interest rates are linked to LIBOR plus Margin plus Guarantors margin.


f. Foreign Currency Term Loan is repayable within 39 instalments starting March 2017. Interest rate is linked to LIBOR plus margin thereon is payable on monthly basis.


g. (i) Finance Lease obligation for six aircraft secured by Corporate Guarantees provided by the Subsidiary Company aggregating to Rs.111,780 lakhs equivalent to USD 1,724 lakhs (Previous Year Rs.161,492 lakhs equivalent to USD 2,437 lakhs).


(ii) Repayable in quarterly / half yearly instalments over a period of twelve years from the date of disbursement of the respective loans. Interest rate are linked to LIBOR plus margin.


1. OTHER LONG TERM LIABILITIES


Note:


The Company had entered into an agreement with Godrej Buildcon Private Limited, Mumbai (GBPL) for the development of its plot of land, situated at Bandra-Kurla Complex, Mumbai, taken on long term lease from MMRDA. The development has since been completed and during the year the Company has taken possession of its entitled share of office space in the developed plot land and has recorded Rs.70,265 lakhs in ‘Capital work-in-progress’. During the year, the Company has further received a credit of an amount of Rs.2,989 lakhs (Previous Year Rs.15,331 lakhs net of TDS of Rs.154 Lakhs) as its share of accrued profit from the said project until 31st March, 2017. Consequent upon the completion of the development, the advance received from the developer together with the profit accrued to the Company till 31st March, 2017 aggregating to Rs.54,820 lakhs has been adjusted against the carrying value of the leasehold land amounting to Rs.39,354 lakhs and the balance of Rs.15,466 lakhs has been accounted as ‘Other income’. The balance outstanding to GBPL amounted to Rs. 52,129 lakhs and is recorded under ‘Other Current Liabilities’.


Redelivery of Aircraft:


As per Accounting Standard 29, Provisions, Contingent Liabilities and Contingent Assets, given below is the movement in provision for Redelivery of Aircraft.


The Company has in its fleet certain aircraft on operating lease. Per the terms of the lease agreements, the aircraft have to be redelivered to the lessors at the end of the lease term in certain stipulated technical condition. Such redelivery conditions would entail costs for technical inspection, maintenance checks, repainting costs prior to its redelivery and the cost of ferrying the aircraft to the location as stipulated in the lease agreements.


The Company, therefore, provides for such redelivery expenses, as contractually agreed, in proportion to the expired lease period.


Security and Salient Terms :


a) Loans aggregating to Rs.25,252 lakhs (Previous Year Rs.116,592 lakhs) are secured by way of hypothecation of Inventories (excluding Aircraft fuel), Debtors / Receivables [excluding (i) credit card receivables, (ii) IATA and BSP receivables from the Kingdom of Saudi Arabia, United Arab Emirates, Qatar, Oman, Bahrain and Kuwait, collectively called as Gulf receivables (iii) receivables from aircraft subleased but including claim receivables from aircraft lessors, Ground Support Vehicles / Equipment (excluding trucks, jeeps and other motor vehicles), Spares (including engines), Data Processing Equipment, other current assets excluding cash and bank balances and fixed deposits with bank both present and future, the residual Aircraft proceeds and all accounts of the borrower in which such aircraft proceeds are deposited in relation to existing fleet of 13 aircraft on pari passu basis. The Company has escrowed the entire IATA collection excluding Gulf receivables with the lead bank for facilitating interest servicing and regularisation in case of any irregularity.


b) Foreign Currency Loan of Rs.Nil (Previous Year Rs.185,514 lakhs) was availed against standby letter of credit issued by foreign banks backed by corporate guarantee provided by one of the Shareholders.


c) The rate of interest for the loans listed in (a) & (b) are linked to respective Banks’ MCLR / LIBOR plus Margin.


2. The Company has equity investment (net of impairment) of Rs.Nil as on 31st March, 2017 (Previous Year Rs.Nil) in Jet Lite (India) Limited, a wholly owned subsidiary (“Subsidiary company”), and has advanced loans (net of provision) amounting to Rs.206,768 lakhs as on 31st March, 2017 (Previous Year Rs.212,132 lakhs). The subsidiary company has negative net worth as on 31st March, 2017. Considering the current performance and the operating parameters of the subsidiary company, the Management has created a provision of ’ 5,789 lakhs during the Year ended 31stMarch, 2017. The Board of Directors at its meeting held on 2nd September, 2015 approved the scheme of merger of Jet Lite (India) Limited, a wholly-owned subsidiary, with the Company (“The Scheme”) as per the provisions of section 391 to 394 of the Companies ActRs.1956, subject to receipt of requisite approvals. The appointed date, per the terms of the scheme is 1st April, 2015. The Scheme was approved by the Shareholders and Creditors of both the Companies on 22nd April, 2016. The Hon’ble Bombay High Court has since approved “The Scheme” on 20thOctober, 2016. The Company is now awaiting the approval of Ministry of Civil Aviation to “The Scheme”. Pending receipt of such approval, the Board of Directors at its meeting held on 11th November, 2016 and by circular resolution dated 30th March, 2017 extended the time period for obtaining required consents / approvals under the Scheme from 31st December, 2016 to 31st March, 2017 and subsequently to 30th September, 2017.


The accounting impact of “The Scheme” can only be reflected in the financial statements upon “The Scheme” becoming effective after filing of the Order of Hon’ble Bombay High Court with the Registrar of Companies, Pending such approval and filing, the financial statements as at and for the year ended 31st March, 2017 and year ended 31st March, 2016 do not include any adjustment that will arise on implementation of The Scheme and the Company’s loans and advances to Subsidiary Company continues to be carried at their carrying amount.


3. CONTINGENT LIABILITIES AND COMMITMENTS (to the extent not provided for)


A. Contingent Liabilities


i. The Company is in receipt of favourable orders in relation to certain service tax, income tax, customs and octroi demands. However, respective tax departments have preferred an appeal against these orders before higher appellate authorities. The amounts involved (excluding interest and penalty thereon, if any, not included in such demands) in these appeals as on 31st March, 2017, with respect to service tax, income tax (including FBT), customs and octroi aggregating to Rs.179,511 lakhs (Previous Year Rs.179,511 lakhs), Rs.20,123 lakhs (Previous Year Rs.27,982 lakhs), 5 lakhs (Previous Year Nil) and Rs.2,899 lakhs (Previous Year Rs.2,899 lakhs) respectively are not included above as there is no outstanding demand in relation to the same.


ii. The Company has provided security by way of a mortgage on its land situated at Bandra-Kurla Complex, Mumbai along with construction thereon, present and future and first charge on Company’s entitlement under the development agreement (excluding built up area of 75,000 square feet) for the aforesaid plot of land against the financial assistance of Rs. 50,000 lakhs (Previous Year Rs. 50,000 lakhs) provided by a financial institution to its developer Godrej Buildcon Private limited.


iii. The Company had acquired 100% of the shareholding of Sahara Airlines Limited (SAL) (now known as Jet Lite (India) Limited) in April, 2007. As per the Share Purchase Agreement (SPA) as amended by the subsequent Consent Award, the mutually agreed sale consideration was to be paid to the Selling Shareholders Sahara India Commercial Corporation Limted (SICCL) in four equal interest free instalments by 30th March, 2011. As a result of certain disputes that arose between the parties, both the parties had filed petitions in the Hon’ble Bombay High Court for breach of SPA as amended by the subsequent Consent Award. The Hon’ble Bombay High Court delivered its Judgment on 4th May, 2011 whereby SICCL’s demand for restoration of the original price of Rs.200,000 lakhs was denied and the Purchase Consideration was sealed at the revised amount of Rs.145,000 lakhs. However, in its judgment, the Hon’ble Bombay High Court has awarded interest at 9% p.a. on the delayed payments made to SICCL largely on account of ongoing legal dispute. In view of this Order, a sum of Rs.11,643 lakhs became payable as interest which has been duly discharged by the Company. As a result of this discharge, the undertaking given by the Company in April 2009 for not creating any encumbrance or alienation of its moveable or immoveable assets and properties in any manner other than in the normal course of the business, stands released.


Though the Company had complied with the order of the Hon’ble Bombay High Court, based on legal advice, it filed an appeal with the Division Bench of the Hon’ble Bombay High Court contesting the levy of interest. SICCL also filed an appeal with the Division Bench of the Hon’ble Bombay High Court for restoration of the purchase consideration to Rs.200,000 lakhs and for interest to be awarded at 18% p.a. as against the 9% p.a. awarded by the Hon’ble Bombay High Court.


The Division Bench of the Hon’ble Bombay High Court heard the matter and vide its order dated 17th October, 2011 dismissed both the appeals as being not maintainable in view of jurisdictional issue. The Company has since filed Special Leave Petitions (SLP) before the Hon’ble Supreme Court challenging both the orders of 4th May, 2011 and 17th October, 2011. SICCL had earlier filed a SLP before the Hon’ble Supreme Court for increased compensation and interest.


Both the SLPs, filed by Jet Airways as well as SICCL, came up for hearing before the Supreme Court. The Supreme Court directed the parties to file the Counter and Rejoinder, which has since been filed. The Supreme Court also recorded that the statement made by Jet Airways, as recorded in the order dated 6th May, 2011 passed by the Hon’ble Bombay High Court, would continue till further orders.


The Company has filed its Counter Affidavit in the SLPs filed by SICCL and the Hon’ble Supreme Court has granted further time to SICCL to file their Rejoinder.


Note :


The Company is a party to various legal proceedings in the normal course of business and does not expect the outcome of these proceedings to have any adverse effect on its financial conditions, results of operations or cash flows. Further, claims by parties in respect of which the Management have been legally advised that the same are frivolous and not tenable, have not been considered as contingent liabilities as the possibility of an outflow of resources embodying economic benefit is highly remote.


4. FOREIGN EXCHANGE DIFFERENCES


With effect from 1st April, 2011, the Company opted to apply the provisions under Para 46A of AS 11. In line with the said notification, the Company has amortised the exchange difference as detailed in the Accounting Policy L in Note 1. The unamortised portion gain of Rs.1,683 lakhs (Previous Year loss of Rs.16,437 lakhs) is accumulated in Foreign Currency Monetary Item Translation Difference Account (FCMITDA) grouped under reserves and surplus. The amortised portion of foreign exchange Loss incurred on long term foreign currency monetary items for the year ended 31st March, 2017 is Rs.8,972 lakhs (Previous Year Rs.6,547 lakhs). Further, the amount of exchange difference adjusted to the tangible assets during the year is Rs.4,177 lakhs - net gain (Previous Year Rs.29,710 lakhs - net loss) and the unamortised balance (carried as a part of tangible asset), as at the year end, aggregates to Rs.169,376 lakhs (Previous Year Rs.234,523 lakhs).


5. UNHEDGED FOREIGN CURRENCY EXPOSURES


The foreign currency exposures (other than investments) that have not been hedged by any derivative instrument or otherwise as on 31st March are as follows :


6. EMPLOYEES BENEFITS


A. Defined contribution plans


The Company makes contributions at a specified percentage of payroll cost towards Employees Provident Fund (EPF) for qualifying employees. The Company recognised Rs.11,155 lakhs (Previous Year ’ 5,829 lakhs) for provident fund contributions in the Statement of Profit and Loss.


B. Defined benefit plan


The Company provides the annual contributions as a non-funded defined benefit plan for qualifying employees. The scheme provides for payment to vested employees as under :


i. On normal retirement / early retirement / withdrawal / resignation :


As per the provisions of Payment of Gratuity Act, 1972 with vesting period of 5 years of continuous service.


ii. On death while in service :


As per the provisions of Payment of Gratuity Act, 1972 without any vesting period.


The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation for gratuity was carried out on 31st March, 2017 by an actuary. The present value of the defined benefit obligations and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.


C. Other Long Term Employee Benefit


The obligation of Compensated Absences (non-funded) for the year ended 31st March, 2017, amounting to Rs.3,894 lakhs (Previous Year Rs.1,289 lakhs) has been recognised in the Statement of Profit and Loss, based on actuarial valuation carried out using the Projected Unit Credit Method.


7. The Company has entered into a “Power by the Houi” (PBTH) Engine Maintenance agreements with a Service providers for its Next Generation Boeing 737 Aircraft fleet, ATR Aircraft fleet and Boeing 777 Aircraft fleet for future engine shop visits. Subsequent to such arrangements, the Company expenses out the cost of PBTH at the rate specified in the contract with the service provider to the Statement of Profit and Loss and treats the variable rentals payable to the Lessors as receivables to the extent considered good of recovery for set off against future claims reimbursable by the Lessors on each engine shop visit. The Company has recognised such expected refunds of variable rentals from lessors towards future engine repairs based on joint validation of the Company’s maintenance plan with the service provider. Accordingly, such variable rent of Rs.78,567 lakhs (Previous Year Rs.83,494 lakhs) has been presented as “Contribution Receivable from Lessors” bifurcated into current and non-current based on expected engine shop visits in next 12 months and beyond.


8. LEASES


The Company has entered into Finance and Operating Lease agreements. As required under the Accounting Standard 19 on ‘Leases’, the future minimum lease payments on account of each type of lease are as follows :


A. Finance Leases / Hire Purchase (Aircraft)


The salient features of a Finance Lease / Hire Purchase Agreement are :


- Option to purchase the Aircraft either during the term of the Hire Purchase on payment of the outstanding Principal amount or at the end of the Hire Purchase term on payment of a nominal option price.


- In the event of default, the Hirer / Lessee is responsible for payment of all costs of the Owner including the financing cost and other associated costs. Further a right of repossession is available to the Owner / Lessor.


- The Hirer / Lessee is responsible for maintaining the Aircraft as well as insuring the same.


- In the case of Finance Lease, the property passes to the Lessee, on payment of a nominal option price at the end of the term.


B. Operating Leases


a) The Company has taken various residential / commercial premises under cancellable and non-cancellable operating leases. These lease agreements are normally renewed on expiry.


The future minimum lease payments in respect of non-cancellable period, as at 31st March are as follows:


b) The Company has taken on operating lease Aircraft and Spare Engines. The future minimum lease payments in respect of which, as at 31st March are as follows :


The Salient features of an Operating Lease agreement are :


- Monthly rentals paid in the form of fixed and variable rentals. Variable Lease Rentals are payable at a pre-determined rate based on actual flying hours. Further, these predetermined rates of Variable Rentals are subject to annual escalation as stipulated in the respective lease agreements.


- The Lessee neither has an option to buyback nor has an option to renew the leases.


- In case of delayed payments, penal charges are payable as applicable.


- In case of default, in addition to repossession of the aircraft, damages including liquidated damages are payable.


- The Lessee is responsible for maintaining the Aircraft as well as insuring the same. The Lessee is eligible to claim reimbursement of costs as per the terms of the lease agreement.


- These leases are non-cancellable.


c) The future minimum lease payments in respect of Landing Rights, are as follows :


d) Details of future minimum lease income in respect of one (1) Aircraft [Previous Year Ten (10)] given on non-cancellable Dry Lease as at 31st March is as follows :


The Salient features of Dry Lease agreements are as under :


- Aircraft are leased without insurance and crew.


- Monthly rentals paid are in the form of fixed and variable rentals. Variable Lease Rentals are payable at a pre-determined rate based on actual flying hours. Further, these predetermined rates of Variable Rentals are subject to annual escalation as stipulated in respective lease agreements.


- The Lessee neither has an option to buyback nor has an option to renew the leases.


- These dry leases are non-cancellable.


Details of owned Aircraft given on non-cancellable Dry Lease are as under:


e) The lease rental expense of Rs.330,897 lakhs (Previous Year Rs.310,843 lakhs) is recognised during the year.


9. SEGMENT INFORMATION


a) Primary Segment : Geographical Segment


The Company, considering its level of international operations and internal financial reporting based on geographic segment, has identified geographic segment as primary segment.


The geographic segment consists of :


i. Domestic (air transportation within India)


ii. International (air transportation outside India)


Leasing operations are classified into (i) or (ii) above based on the domicile of the lessee being within or outside India.


Revenue and expenses directly attributable to segments are reported based on items that are individually identifiable to that segment, while the remainder of the expenses are categorized as unallocated which are mainly employee remuneration and benefits, other selling and distribution expenses, other operating expenses, aircraft lease rentals, depreciation / amortisation and finance cost, since these are not specifically allocable to specific segments as the underlying assets / services are used interchangeably. The Company believes that it is not practical to provide segment disclosures relating to these revenue and expenses, and accordingly these expenses are separately disclosed as “unallocated” and directly charged against total revenues.


The Company believes that it is not practical to identify fixed assets used in the Company’s business or liabilities contracted, to any of the reportable segments, as the fixed assets are used interchangeably between segments. Accordingly, no disclosure relating to total segment assets and liabilities are made.


b) Secondary Segment: Business Segment


The Company operates into two business segments viz. Air Transportation and Leasing of Aircraft and has identified the same as secondary segment to be reported considering the requirement of Accounting Standard 17 on “Segment Reporting” which is disclosed as under :


10. Various initiatives undertaken by the Company in relation to cost synergies, revenue management opportunities, enhanced ancillary revenues have resulted in significant improvement in operating cash inflow. Further, our continued thrust to improve operational efficiency and initiatives to raise funds are expected to result in sustainable cash flows. Accordingly the financial statements continue to be prepared on a going concern basis, which contemplates realisation of assets and settlement of liabilities in the normal course of business.


11. Other income include surplus of Rs.31,155 lakhs (Previous Year Rs.34,688 lakhs) for the Year ended 31st March, 2017 consequent upon the satisfaction of the terms and conditions underlying the agreement for the transfer of ‘Jet Privilege Frequent Flyer Programme’ (JPFFP) undertaking to Jet Privilege Private Limited (JPPL) on 21st April, 2014 as a going concern on a slump sale basis. Further, an amount of Rs.30,449 lakhs is being carried forward (Current Liability - Rs.30,449 lakhs, Previous Year - Rs.31,180 lakhs and Non-Current Liability - Rs.Nil, Previous Year - Rs.30,423 lakhs) for appropriate credit to income in the subsequent periods on fulfilment of the underlying commitments / obligations as stipulated in the said agreements.


12. A) Particulars of loans, guarantees or investments under Section 186


The operation of the company are classified as “infrastructure facilities” as defined under schedule VI to the act. Accordingly the disclosure requirements specified in sub section 4 of section 186 of the Act in respect of loan given, investment made or guarantee given or security provided and the related disclosures on purpose/utilization by recipient companies, are not applicable to the company.


13. Other information


Information with regard to other matters, as required by schedule III to the act is disclosed to the extent applicable to the Company for the year.


14. Previous Years Figures


Previous Year’s figures have been regrouped / rearranged / reclassified / reworked wherever necessary to correspond with the current year’s classification / presentattion

CIN: U67190WB2003PTC096617. Trading in Commodities is done through our Group Company Dynamic Commodities Pvt. Ltd. The company is also engaged in Proprietory Trading apart from Client Business.
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Disclosure: We, Dynamic Equities Private Limited are also engaged in Proprietory Trading apart from Client Business. In case of any complaints/grievances, clients may write to us at compliance@dynamiclevels.com

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